May 12, 2016

Rent Going Up? Planning to Move? Welcome to the Street

by John Lawrence

This article was originally published in the 1969 print edition of the San Diego Free Press. It follows on to our 4 part series on affordable housing in San Diego. So what else is new? Nothing except the price of real estate.

The housing situation in San Diego, especially for people with low incomes, bears all the earmarks of a terminal illness. The condition is grave and seems destined to get worse. The City will tell you that 1968 was a year in which San Diego experienced a record boom in housing construction, but their figures are completely misleading. It is true that there were 12,525 units of housing begun in 1968, as compared with 6,100 units in 1967, and that while city building doubled, rural building was up 47% in 1968 over the previous year. Yet most of this activity was in the realm of plush apartments and condominiums which cater to middle and high income groups, thus leaving people with low incomes at the mercy of soaring prices and a vacancy rate for the entire city of less than one percent.

This critical situation in San Diego is by no means unusual nationally. 90% of the family residential units in the US cost the purchaser over $20,000. [As an aside, coastal real estate in San Diego County could be purchased for below $20,000 in 1969. Today it would be hard to find anything for less than $1,000,000.] Yet half the people earn less than $7,800 per year. To make the payments on a $20,000 home, a person must earn at least $9,000 per year. A little simple arithmetic shows that at least half the people in this country can afford only 10% of the housing now being constructed. When it comes to low cost housing today, the law of supply and demand seems to have gone awry.

What makes housing so expensive? The housing industry is one of the most inflated sectors of the US economy. The construction industry represents 10% of the GNP--80 billion dollars a year which is divided up among a lot of relatively small companies. There hasn't been the centralization that has taken place in the automobile industry, for example. Mass production of industrialized homes could cut costs considerably, but this does not occur mainly because the rate of profit in low cost housing does not compare with that in higher cost housing.

Construction costs have increased 85% since 1951. In the past year the cost of some materials, particularly lumber, has increased as much as 100%. But labor has been the chief reason why costs have increased so spectacularly. Many plumbers and carpenters now earn $20,000 per year, often for a 32 hour week. Craftsmen in general now earn at about twice the hourly rate of college graduates. Another reason for the high cost of housing is land. The cost of urban residential land across the nation has risen nearly 400% since 1934. Land costs are rising so high that it is fast becoming a reality that the land costs more than the structure built upon It. Since land is becoming so expensive, houses are being crowded closer and closer together and multi-family dwellings are becoming more common.

The attitude of the business community toward low coat housing is negative. The general trend is to replace dilapidated housing by high cost housing, thus upgrading the property values and leaving those who cannot afford it literally out on the street. Poorer people are eventually forced out of suburbs and into the already crowded city ghettos and barrios. This type of policy is being implemented here in Ocean Beach where business interests are trying to oust hippies and other low income people by raising rents and/or replacing low cost with high cost housing.

What is being done to correct this situation in San Diego? There is a group of businessmen called "San Diego Housing", a non-profit development corporation headed by Dan Grady, whose purpose is to give assistance and expertise to people who want to avail themselves of Federal housing programs. They have projects in Linda Vista and Southeast San Diego. Some of the Federal housing programs are the following: Model Cities, Leased Housing program, Rent Subsidy program, Community Housing Improvement and Revitalization program and Home Ownership Mortgage Insurance Assistance program. Many of these programs were put into effect by the 1965 Housing Act. The Model Cities program is an attempt to plan a 5 year action program to resolve problems in 10 different areas including housing, welfare, crime and transportation.

$268,000 has been allocated to San Diego for the first year. This money will go to analyze problems and come up with a plan. Additional money will he required to actually implement a program. The MC [Model Cities] project is concentrating on two areas of San Diego: Southeast and San Ysdro. This program is good in that it is intended to be a comprehensive approach, but it is doubtful whether the Federal funds needed will be forthcoming.

The Leased Housing program involves cities leasing housing units from private owners. The city then subleases these to needy people who pay rent amounting to 25% of their income.

The San Diego Housing Authority administers the program and federal subsidies finance it. This year San Diego had a quota of 1000 units. This program has been unsuccessfull because private owners are reluctant to lease their homes to needy people when they can rent them more profitably on the open market. The quota was never filled.

The Rent Subsidy program involves the subsidization of rent paid by poor people who qualify. Under the program people pay out only 25% of their income.

The purpose of the Community Housing, Improvement and Revitalization program is to conserve property values and improve the living environment. Under this program San Diego's current budget is 1.7 million dollars. The [purpose of the] Home Ownership Mortgage Insurance Assistance program is to reduce the interest on the home purchases mortgage rate to 1%. [This could be accomplished more efficiently with a public bank.] All of these programs are fragmented, piecemeal attempts to solve a problem which needs a massive unified, concerted approach. They are not adequate to the dimensions of the problem.

They all in effect subsidize the rich landlords, property owners, and capital investors by paying them inflated market rates for the use of their property and then letting the poorer people use it at prices they can afford. It seems everybody is happy, both rich and poor, but it means that the rich get richer and the poor stay where they are [thus driving income inequality]. If the goal of those programs is to solve the problems of inadequate and insufficient housing, they fail miserably. The difficulty is that the federal government makes inefficient use of the tax dollars at its disposal. Instead of using the money directly to provide low cost housing for those who need it, the government funnels the money to the wealthy property owners in return for the limited use of their land.

If the federal government's programs are not adequate to the need, can private industry fill the void in low cost housing? There are no handsome profits to be made in this field. Industry will only venture into it when subsidized by the federal government and then only as a measure of profiteering off government funds--again off our tax dollars.

A good example of this is the South Bay Terrace project owned by a Mr. Kahn. Subsidized by Federal funds, Kahn is building what many people regard as another ghetto--crowding as many units into one parcel of land as possible. Many urban experts think that for low cost housing to be effective, it must not he all concentrated in one location, but should be dispersed throughout the city. This leads to a more homogeneous distribution of income groups and a healthier social situation.

The reason that it is unprofitable to build low cost housing on the open market is that the cost of any housing is dominated by land, labor and profits. These are used to practically the same extent regardless of the "quality" of the structure being built. A very small fraction of the total cost goes into aspects that separate high quality housing from low quality housing. In other words it costs almost as much to build "low" cost housing as "high" cost housing, but "high" cost housing is more profitable.

Without even considering "communitizing" the land, many housing experts have concluded that the only solution to this problem is the introduction of the mass-produced prefabricated housing. This industry could he organized by the government as a non-profit enterprise. In one form this has happened with the mobile home business, and nearly one out of every four Californians live in a mobile home. But this industry in still run by profit making business men and it isn't that much cheaper. [Factory produced tiny homes could get the homeless off the streets at a minimal cost.]

As it stands now, the poor will remain dependent on a handout and remain in sub-human dwellings, while the tax payer gets pissed off at government waste. Too often the taxpayer will blame the poor for what is a government fuckup that aids the rich. Realistic low cost housing, which would curb inflation and save tax dollars, will remain a long way off unless the profit motive and the profit makers are expurgated from the solution.